Monday March 19, 2018

Finances

Facebook Posts Earnings Beat

Facebook, Inc. (FB) released its latest quarterly earnings report on Wednesday, November 1. The social media giant's profits exceeded the prior year's numbers by 49%.

The company reported revenue of $10.33 billion for the third quarter. This is up from $7.01 billion during the same quarter last year and exceeded Wall Street's estimates of $9.84 billion.

"Our community continues to grow and our business is doing well," said Facebook founder and CEO Mark Zuckerberg. "But none of that matters if our services are used in ways that don't bring people closer together. We're serious about preventing abuse on our platforms."

Net income for the quarter was $4.71 million, or $1.59 per share, up from $2.63 million, or $0.90 per share, at this time last year. Facebook had 16% year-over-year increases in daily and monthly active users.

This week, Facebook was questioned by Congress regarding the influence of foreign actors on the 2016 presidential election using social media. Facebook representatives were questioned by the Senate Judiciary Committee and the House and Senate Intelligence Committees this week. Facebook reported that over 126 million Americans came in contact with foreign-backed political advertisements during the election. The company stated it would take additional measures to prevent this influence in the future. Facebook is committed to doubling the number of individuals in its safety and security sectors by the end of 2018.

Tesla Earnings Miss the Mark

Revenue for the third quarter was $2.98 billion, ahead of the $2.95 billion projected by analysts, and an increase from $2.30 billion in the same quarter last year. The company's stocks fell 5% on Wednesday after reporting the largest quarterly loss in its history.

"Model 3 represents a significant milestone in the coming of age of electric vehicles," said Tesla Chairman and CEO Elon Musk and Tesla CFO Deepak Ahuja in a joint statement to shareholders. "We aspire to transform other segments of the automotive market in the future. At the unveiling of the Tesla Semi on November 16, 2017, we will demonstrate just how compelling electric drive will be for the global trucking industry. We look forward to showing you something truly incredible."

The company's net loss for the third quarter was $671.16 million, or $2.92 per share. This represents a steep decline year-over-year from a net income of $21.88 million, or $0.14 per share, last year.

Tesla has provided aid to Puerto Rico after hurricanes Irma and Maria wreaked havoc, which has slowed its production and projects slated to be revealed. Through the use of Tesla's solar panels and commercial storage batteries, power was restored to Children's Hospital in Puerto Rico. Elon Musk announced that it was the first of many projects to restore power. Analysts believe this project could provide a platform for Tesla to show the world its power and scalability of its renewable energy sources.

Tesla, Inc. (TSLA) shares ended the week at $306.09, down 4.1% for the week.

Apple Announces Record Quarter

Apple, Inc. (AAPL) released its quarterly earnings report on Thursday, November 2. The technology company beat Wall Street's estimated revenue of $50.8 billion.

The company reported fourth quarter revenue of $52.58 billion, up 12% from $46.85 billion during the same quarter last year. Apple's stock rose almost 4% in after-hours trading and pushed the market capitalization past $900 billion.

"We're happy to report a very strong finish to a great fiscal 2017, with record fourth quarter revenue, year-over-year growth for all our product categories, and our best quarter ever for Services," said Apple CEO Tim Cook. "With fantastic new products including iPhone 8 and iPhone 8 Plus, Apple Watch Series 3, and Apple TV 4K joining our product lineup, we're looking forward to a great holiday season, and with the launch of iPhone X getting underway right now, we couldn't be more excited as we begin to deliver our vision for the future with this stunning device."

The company reported net income of $10.71 billion, or $2.07 per share. This was an increase from the prior year's quarterly net income of $9.01 billion, or $1.67 per share.

In the fourth quarter, Apple saw a 12% increase year-over-year in product sales. The iPhone 8, released in September, had better-than-expected sales. On Friday, the company released its 10th-anniversary iPhone X. The smart phone incorporates smart-lock technology that uses facial recognition to unlock the phone, with a price tag for the base model at just under $1,000, is the most expensive device in the iPhone family.

Apple, Inc. (AAPL) shares ended the week at $172.50, up 5.3% for the week.

The Dow started the week of 10/30 at 23,406 and closed at 23,539 on 11/3. The S&P started the week at 2,578 and closed at 2,588. The NASDAQ started the week at 6,694 and closed at 6,764.

Treasury Yields Fall

U.S. Treasury bond yields fell early this week in anticipation of the Federal Open Markets Committee meeting on Tuesday and Wednesday. The yield curve dropped to a ten-year low after the Fed announced auction sizes would remain the same.

Bond yields for the benchmark 10-year note fell on Wednesday 3.37%, following the release of the Fed's policy statement. The Fed left interest rates unchanged and described the economy as solid.

"The Fed could have talked up some of the stronger data and made a stronger case for the December move, instead they didn't underscore the positives and they did continue to note that inflation has continued to decline this year," said Prudential Fixed Income chief investment strategist, Robert Tipp. "Given that they have signaled the December move in [interest rates], you could see this statement is supporting the December [increase] but not locking in that hike."

On Thursday, the House tax bill, "The Tax Cuts and Jobs Act," was released. Bond yields dropped in response due to concern surrounding the federal deficit. The yield curve continued to flatten and the 10-year note fell to 2.34%. Analysts expect the yield curve to stay flat until inflation picks up.

"The questions is what actually gets passed," said Schwab Center for Financial Research senior fixed income strategist, Kathy Jones. "What the bond market really cares about is how much of the tax cut will end up with consumers."

Yields remained flat following President Donald Trump's announcement on Thursday that Jerome Powell would be replacing Janet Yellen as the Federal Reserve Chair in February. Powell is seen by economists as a status quo successor to Yellen.

The 10-year Treasury note yield finished the week of 10/30 at 2.34%. The 30-year Treasury note yield was 2.82%.

Mortgage Rates Hold

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, November 2. The report showed that the 15 and 30-year mortgage rate averages remained largely unchanged this week.

The 30-year fixed rate mortgage averaged 3.94% this week, the average remains unchanged from last week. During the same time last year, the 30-year fixed rate mortgage averaged 3.54%.

This week, the 15-year fixed rate mortgage averaged 3.27%, up from 3.25% last week. Last year at this time, the 15-year fixed rate mortgage averaged 2.84%.

"Following a strong surge last week, rates held relatively flat this week," said Freddie Mac Chief Economist Sean Becketti. "The 30-year mortgage rate remained unchanged at 3.94%, while the 10-year Treasury yield dipped roughly 4 basis points. The markets' reaction to the upcoming announcement of the next Fed chair may impact the movement of rates in next week's survey."

Based on published national averages, the money market account finished the week of 10/30 at 0.73%. The 1-year CD finished at 1.58%.